Recent developments in inflation and M3 velocity in the euro area have raised serious doubts about the reliability of M3 growth as a pillar of the ECB's monetary policy strategy. We develop a very flexible and comprehensive state-space framework for modeling the velocity of circulation. Our...

We assess the efficiency of monetary policy to guide inflation expectations in high and low regimes. Using quantile regression we analyze the persistence of inflation expectations from the Consensus Economics Survey at different quantiles. We find a) empirical evidence that expectations are not...

It is well-known that interest rates are extremely persistent, yet they are best modeled and understood as stationary processes. These properties are contradictory in the workhorse Gaussian affine term structure model in which persistent data often result in unit roots that imply...

In this paper, we examine the time series properties of inflation in seven countries that have adopted inflation targeting. Unlike previous studies, we utilize a non-linear mean reverting adjustment mechanism for inflation and we discover that, although deviations of inflation from the target...